Singapore Exchange Ltd (SGX) is in discussion with STP utilities Omgeo - a joint venture between the Depository Trust and Clearing Corporation and Thomson Financial - and Global Straight Through Processing Association (GSTPA) to act as a 'concentrator' for cross border settlements.
In this role, SGX would receive settlement instructions from market participants and transmit these instructions to the STP service providers for settlement. Foreign institutions would also be able to send instructions via the matching utilities to SGX to settle trades in Singapore.
Both Omgeo and GSTPA are developing services for matching trade settlement instructions. Omgeo's matching utility is Central Trade Manager, while GSTPA's is Transaction Flow Manager. Market participants who do not have a direct link to the matching utilities can connect via a concentrator to achieve STP for cross border trades, say the companies.
SGX is currently reviewing the business model, including the range of services to be provided as a concentrator, and the cost of providing these services.
SGX joins other market infrastructure operators, including Austraclear, SegaIntersettle and the Canadian Depository for Securities, in agreeing to take on the concentrator role. Financial institutions and vendors lined up include Bank of New York, JP Morgan Chase, Merrill Lynch, SunGard, ADP, and Financial Models. It is estimated that the concentrators ultimately may be responsible for as much as 50% of volumes passing through the matching engines.